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May 25, 2023

How to Check if a Business is Legitimate

Teddy Butz

In brief: 

  • Information needed to check if a company is legit includes its name, address, registration documents, licensing documents (if applicable), and tax information.
  • In the US, all of this information can be found in the Secretary of State portal for the state in which a business was registered. Certain other information can also be found and verified in other places, as well.
  • The easiest way to get all of the information needed to know if a company is legit is to use a dedicated KYB solution like Middesk.

Companies want to avoid doing business with other companies that aren’t properly registered, or are otherwise not in good standing. It puts a company in danger of gaining a negative reputation that costs it business, especially if the company ends up breaking the law.

So how does a company tell which businesses are safe to deal with, and which ones are trouble? This guide will discuss how to check if a business is legit, including the information that a legitimate company should have, as well as where to reliably find valid records of this information.

The first step in how to tell if a company is legit is knowing what information to look for.

Information you need to properly verify if a business is legit

The process of a company verifying whether or not another company is legitimate before onboarding it as a partner or client is called “Know Your Business”, or KYB. Some of the common information needed for how to know if a company is legit includes:

  • The business’s legal name
  • The business’s registered street address
  • Documented proof of the business’s incorporation or registration
  • Licensing documents relevant to the business’s industry
  • Tax information, including tax identification number (TIN)

How to check if a business is legit for compliance

Now that we’ve covered the information required for how to find out if a business is legit, the next step is knowing how to get this information. This section will explain how to find each piece of information needed to determine business legitimacy.

1. Legal name

An obvious piece of information to know is the name a company is legally registered to operate under. This should probably be sourced directly from an official database, like a state Secretary of State portal in the US. This avoids confusion with other informal trade names for the company, including any “doing business as” names.

2. Registered address

A legitimate company should have a physical presence somewhere in the world. If it doesn’t, it may be a shell corporation: a company that has no active business operations, and can thus be used to hide money and other illicit transactions from authorities.

Note that a business may have multiple addresses beyond its registration address if it operates in different jurisdictions. So be sure to find all of these addresses and check if they’re legitimate. You can cross-check them between official sources, like state Secretary of State portals, and mapping software such as Google Maps.

3. Registration documentation

This is information that proves a business is authorized to operate in a jurisdiction. For the US, this is usually found at a state’s Secretary of State portal, but this may require an account or paying fees. It can also be obtained through a public information request to a state Secretary of State office, but this also costs money and can take quite a bit longer.

Middesk has a directory linking to the Secretary of State portal for each US state, including D.C. However, Middesk itself is integrated with each state’s Secretary of State portal. It will call up the information from the relevant portal automatically as part of profiling a company.

4. Industry-specific license documents

In addition to government registration, certain types of businesses require licensing from separate regulatory agencies for their industries. These include companies in construction, finances, insurance, health care, real estate, and transportation. It’s important to make sure a business is complying with these additional licensing requirements.

This information can likely be found by checking a state Secretary of State portal. It may also be useful to verify this information with the applicable licensing agency.

5. Tax information

All legitimate businesses will have some sort of unique identifier for when they conduct financial transactions, including filing tax returns. This can sometimes be referred to as a tax identification number (TIN), employer identification number (EIN), or legal entity identifier (LEI). Having this number registered means a business is more likely engaging in legitimate and transparent transactions.

Again, this information can typically be found in a state Secretary of State portal. It’s also not a bad idea to validate this information by checking it against what a tax agency, such as the IRS, has on file.

Easiest method for how to check if a company is legitimate in USA

A lot of information required for how to check if a company is legit can be found in official government databases, through public information requests, in other public records, or directly from the company. However, this information can take time and money to access through official channels. And if it’s sourced from unofficial places, the information could be incomplete or unreliable.

That’s why it’s much easier to use a solution like Middesk. Our Business Verification platform draws more than just the information needed for how to check if a company is legitimate from official sources. It also includes additional information that can help verify a business for other compliance purposes. These include statuses related to sanctions lists, restricted industry lists, web presence, litigations, corporate structure changes, and bankruptcies.

Contact our sales team to learn more about how our platform can make onboarding corporate partners and clients faster and more cost-effective.

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